Lord Dubs: My Lords, will my noble friend confirm that the safety margin to which he referred will increasingly have to be filled with imported gas from politically unstable countries? Is not that the basis of concern about the future of supply?

Lord Davies of Oldham: My Lords, my noble friend is right that we will begin to be a net importer of gas, as North Sea stocks decline. I might say that that puts us into the same category as the vast majority of industrialised nations. He will recognise that we have consumed a substantial amount of gas supply from overseas for a long period. Of course, we are addressing ourselves to the issue that with certain purchases as regards gas we will need to guarantee the security of provision.

Baroness O'Cathain: My Lords, how confident is the Minister that the forecasts for demand are correct? The reality is that forecasts have always been incorrect in the past. Given the record in forecasting demand for electricity, is he absolutely convinced that those forecasts are likely to be correct?

Lord Davies of Oldham: My Lords, in energy as in many other fields, forecasting always has an element of uncertainty about it, otherwise it would be the definition of certainty rather than a forecast. Nevertheless, that is the basis on which energy supplies have been provided for the country in the past. We had an acute problem during the storms of 2002 and there have been other occasions when problems have occurred. However, all I can state is that our generating capacity is in line with forecasts of demand, with that substantial margin that all experts attest is sufficient.

8 Oct 2003 : Column 291

Renewables Obligation

3.1 p.m.

Lord Jenkin of Roding asked Her Majesty's Government:

What action they propose to take in the light of the failure of T"U (UK) Ltd and Maverick Energy Ltd to comply with the renewables obligation by paying the #23.6 million due from them by 1st October.

Lord Davies of Oldham: My Lords, we shall be consulting industry on proposals to minimise the adverse impact of any future shortfall on the renewables market, our approach being on the basis that the industry will bear the risk of any electricity suppliers going into administration. We have re-emphasised our commitment to taking necessary legislative action, in particular to address the question of late payments. The T"U administrator estimates that advance interim payments may be in the order of 35 to 40 pence in the pound.

Lord Jenkin of Roding: My Lords, is that not a very complacent Answer? Is the Minister aware that confidence in the market for renewables obligation certificates has been severely shaken by the information that there will be a very big hole in the buy-out fund? Is he further aware that, since the Ofgem announcement in August, there has been virtually no trade whatever in fixed-price deals for renewables obligation certificates? Does that not bode very ill for the Government's policy on increased renewables investment? While that lack of confidence continues, there will be no such investment. The Government should take the matter a great deal more seriously.

Lord Davies of Oldham: My Lords, the Government are taking the matter seriously. We are involved in a review of the renewables obligation with regard to certain possible short-term emendations, which may assist the situation. The noble Lord will recognise that the Government remain fully committed to the renewables obligation. The next time an auction takes place, when we shall be able to measure the market, is for the Scottish renewables obligation on 21st October. We shall be able to look more accurately at the situation at that point.

Lord Ezra: My Lords, bearing in mind that only 1.7 per cent of electricity was generated from eligible renewable sources in 2002, which is well below target, is it not now becoming apparent that the Government have drawn the eligible list too narrowly? Is it not time for the situation to be reviewed? Those sources of energy that can contribute substantially to emissions reduction should be included, such as coal mine methane emissions and clean coal technology, which needs to be developed.

8 Oct 2003 : Column 292

Lord Davies of Oldham: My Lords, as I have indicated on recent occasions to the noble Lord, the Government are open to that proposition and are looking at the ways in which they can extend the commitment to meeting the renewables target of 10 per cent. He is right that in the first year the performance was below what is required, but we regard the renewables target of 10 per cent as realistic. It is a significant target to reach by 2010. The noble Lord will recognise that, even by extending the range of possible contributors to the target, it is still overwhelmingly the case that the target will be reached only if we are able to enhance wind turbine production.

Lord Oxburgh: My Lords, is the Minister aware that banks and other financial institutions will not invest in the renewables sector while the apparent risks of losing money are as substantial as they appear to be?

Lord Davies of Oldham: My Lords, the noble Lord is right. That is a very realistic consideration that has to be taken into account. I indicated earlier that the Government take the matter very seriously. They will look at the matter in terms of the market position, when that becomes clear, and they are also prepared to consider short-term measures that may be effective in restoring confidence in the market, which is what we need to do.

Baroness Miller of Hendon: My Lords, is there not another aspect to the matter? Is it not the case that the surrender of the renewables obligation certificate to Ofgem for #30 each time is a contract between Ofgem and the suppliers? Following normal legal principles, Ofgem will have to find the repayment money, irrespective of its failure to recover the debts. That being so, what steps will the Government take to enable Ofgem to pay its legal and moral obligation and debts? If that is not done, there will be no further investment into renewable energy sources, especially not by the small investors.

Lord Davies of Oldham: My Lords, as I indicated in my original Answer, the responsibility is to be borne by the industry, which is aware of the risks when it undertakes its commitments and makes its contracts. This is quite a serious positionwith the going into administration of T"Uand no one underestimates its significance. However, it is not for the Government to intervene in the market; it is for the market to assess the position and for the Government to see ways in which they can encourage the development of renewables. It is for the market to take the final decision.

The Earl of Mar and Kellie: My Lords, in view of the situation regarding renewables in Scotland and the huge hole in the buy-out fund, will the Scottish auction in 12 days' time really be viable?

Lord Davies of Oldham: My Lords, as I indicated, the Government's position is clear. The market is set up in terms that everybody understands, and is

8 Oct 2003 : Column 293

governed by laws and relationships. It is not for the Government to intervene in that market at present. As I said in response to the noble Lord, Lord Jenkin, we shall see what happens on 21st October, which is the first time that the issue will be tested in the market.

Iraq: Attorney-General's Advice

3.8 p.m.

Baroness Williams of Crosby asked Her Majesty's Government:

Whether they regard current policies in Iraq to be consistent with the legal advice which the Prime Minister received from the Attorney-General.

Baroness Amos: My Lords, it has been the practice of successive governments not to publish advice from the Attorney-General, in accordance with paragraphs 2 and 4(d) of Part II of the Code of Practice on Access to Government Information. The Attorney-General made a statement on 17th March setting out his views on the legality of the use of armed force against Iraq, but his advice was not disclosed. The Government are confident that their policies and actions in Iraq are right and consistent with the UK's international obligations. Events in Iraq are closely monitored by the ad hoc ministerial group, which meets every two weeks.

Baroness Williams of Crosby: My Lords, do the Government recall that on 21st September the civilian administrator of occupied Iraq, Mr Paul Bremer III, issued an orderorder number 39which allowed for the private purchase of all economic sectors of Iraq up to the limit of 100 per cent of ownership by foreign owners, excluding only natural resources from that huge shock therapy?

Are the Government aware that the Attorney-General is reported to have said that,

"wide-ranging reforms of governmental and administrative structures would not be lawful"?

If the Government do not wish to disclose the information provided by the Attorney-General, can they assure the House that in their view order number 39 is compatible with paragraph 43 of the 1907 Hague Regulations, with the Fourth Geneva Convention and with UN Resolution 1483in which the Government committed themselves to upholding international law in every aspect?

Baroness Amos: My Lords, I am aware of the order which was made; in fact, I was in Dubai at the meeting of the World Bank when Iraq's Minister of Finance made the announcement on the private purchase of sectors of Iraq. That decision was taken by the Iraqi

8 Oct 2003 : Column 294

Governing Council and endorsed by the CPA. I will write to the noble Baroness on her specific points on the 1907 Hague Regulations.